Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
[1] A subsequent parliamentary inquiry recommended a royal commission, noting the lack of regulatory intervention by the relevant government authorities,[2] and later revelations that financial institutions were involved in money laundering for drug syndicates, turned a blind eye to terrorism financing, and ignored statutory reporting responsibilities[3] and impropriety in foreign exchange trading.
[8] Michelle Grattan characterised the then-incoming Abbott Liberal-National government as being "determined to weaken protections" that Labor had introduced, although she noted these attempts were defeated by the Senate crossbench.
[9] In light of an account fraud scandal at US-bank Wells Fargo, on 5 May 2014 ABC TV Four Corners, in conjunction with Fairfax journalists, broadcast an exposé of a sales-driven culture within the Commonwealth Bank's (CBA) financial planning division, that was described as profit at all cost.
[2] Several days later, CBA chief executive Ian Narev apologised unreservedly to customers who lost money in the bank's financial planning scandal.
Treasurer at the time, Joe Hockey, whose mother was impacted by the scandal, stated that the bank did not act quickly enough to address the problem.
[10] The CBA was subsequently embroiled in other matters including money laundering for drug syndicates, turning a blind eye to terrorism financing, ignoring statutory reporting responsibilities for more than three years on more than 750,000 accounts,[3] and impropriety in foreign exchange trading.
[19] Westpac refunded $65 million to 220,000 customers after it failed to pass on benefits they should have received under package deals, including home loans, credit cards and transaction accounts, offered by the bank.
[23][24] In June 2015, Greens senator Peter Whish-Wilson put forward a motion for the Abbott government to hold a royal commission into misconduct in the financial services industry.
[25] In a 2016 speech before the National Press Club, opposition leader Bill Shorten outlined his plans for a royal commission into the banking sector, should Labor win government at the 2016 federal election.
[26] Meanwhile, Liberals Warren Entsch MP also supported calls for a royal commission;[26] as well as CBA whistleblower, Jeff Morris, who, for eight years, since 2008, documented the industry's "systemic bad behaviour".
[34][35][36][37][38][39] In late 2017, as a backlash against the legalisation of same sex marriage, the Nationals threatened to introduce a private member's bill calling for a commission of inquiry into the banking system.
On 14 December 2017, the Governor-General Sir Peter Cosgrove issued Commonwealth letters patent appointing the commissioner and the commission's terms of reference.
[59][60] Commissioner Hayne subsequently announced that he would be assisted by legal counsel including Rowena Orr KC, Michael Hodge, Albert Dinelli, Eloise Dias, and Mark Costello.
[64] The Commission invited individuals or entities to make public submissions using an online form, with provision for those who require further assistance via email or telephone.
Before the Royal Commission:[69] ANZ ... acknowledged that it had engaged in misconduct and conduct falling short of community standards expectations relating to home loans, credit cards, processing errors and car finance.
[72][73][74]: 662 [75]: 707 CBA acknowledged that it had engaged in misconduct in limited respects.... in conduct falling below community standards and expectations in relation to add-on insurance, responsible lending and offers of credit.
[69]: 38–9 Commissioner Hayne questioned whether the CBA was "economical with the truth" in failing to tell customers the value of commissions it pays to mortgage brokers in return for selling its products.
[82]: 345–7 [NAB]...acknowledged it had engaged in misconduct and conduct falling below community standards and expectations in relation to home lending, credit cards, personal loans and processing or administration errors.
"[69]: 83 It was reported that NAB employees in greater western Sydney were accepting bribes in order to facilitate loans they knew were based on false documentation in order to reach lending targets and to collect personal bonuses;[83][84] and up to 15 per cent of all home loans approved did not meet NAB's standard criteria for valuation, serviceability and document verification.
[85] Westpac ... acknowledged that across the brands [of Westpac, St George Bank, Bank of Melbourne and RAMS] it ... engaged in actual or potential misconduct and conduct falling below community standards and expectations relating to home lending, credit cards, car loans, add-on insurance, processing or administration errors and unsolicited offers of credit.
[69]: 42 The Commission heard that, similar to ANZ, Westpac believed that it was not its responsibility to verify loan applicants' personal expenses, with this responsibility resting with brokers, especially for car loans originated by motor vehicle dealers acting as brokers;[75]: 776 [86] and that financial kickbacks to car dealers reflected a conflict of interest.
[91] The following month ASIC commenced civil proceedings in the Federal Court alleging that NAB-owned superannuation entities had deducted $100 million in fees from more than 300,000 customers where services were not provided.
[citation needed] In July, proceedings moved to Darwin to examine financial services, particularly funeral insurance, and how they impacted on Indigenous communities.
[98] The Royal Commission did not consider consumer leases, payday loans or in-store credit arrangements' impacts on Indigenous communities because they are not within the terms of reference.
Instead, his report made 24 recommendations relating to institutions and individuals about dishonest misconduct and charged the regulators with the responsibility for taking action.
I thought it telling that Mr. Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million.
I thought it telling that in the very week that NAB’s CEO and Chair were to give evidence before the Commission, one of its staff should be emailing bankers urging them to sell at least five mortgages each before Christmas.
Overall, my fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains.Despite initially defending their positions,[109] by 7 February both Henry and Thorburn had announced their resignations.
